fbpx

M’sia hoped to focus on domestic flights, SIA’s first chief had global ambitions: Why S’pore-M’sia Airlines split

Soft truths to keep Singapore from stalling.

Mothership | January 26, 05:10 pm

Share

Speaking Truth to Power: Singapore’s Pioneer Public Servants is a compilation of oral interviews with 11 of Singapore’s pioneer public servants.

Edited by Loe Hoke Yong, the book features their personal accounts of the civil service’s transition from the colonial era, their relationship with the political leaders of the time, and the rationale underlying the early years of Singapore’s development.

Here, we reproduce an excerpt from the book featuring the perspective of J.Y. Pillay, the first Chairman of Singapore Airlines.

Pillay assumed his role in 1972, when Malaysia-Singapore Airlines split into Malaysia Airlines and Singapore Airlines. He held the position until 1996. From 2005 to 2019, he was Chairman of the Council of Presidential Advisers.

Speaking Truth to Power: Singapore’s Pioneer Public Servants is published by World Scientific and you can get a copy of it here.

***

By Irene Quah

Becoming Chairman of Singapore Airlines

IQ: One of the first government companies which you headed was the Singapore Airlines in 1972 when it started functioning as an independent national carrier. Could you relate to us the circumstances leading to your appointment as its Chairman in 1972?

JYP: Let’s go back a little earlier to mid-1969. I was appointed to the Board of MSA [Malaysia-Singapore Airlines], the joint airline owned by Malaysia and Singapore largely, together with some other minor shareholders.

I was then in the Ministry of Finance, Permanent Secretary in Economic Development Division. A vacancy arose, so I was appointed as a kind of representative of the Ministry of Finance which, after all, owned the shares.

At that time, the Chairman of MSA was Yong Pung How. But shortly after I joined the Board, within three months, he retired and Robert Kuok became the Chairman.

M’sia’s richest man Robert Kuok spills juicy details on clashes that led to end of M’sia-S’pore Airlines

Then in 1971, it was decided that there would be a Chairman each.

Let me just go slightly before that. In late 1970, the two governments decided to split the carrier in the sense that Singapore would develop its own airline, and so would Malaysia.

That decision was taken at the end of 1970. And in 1971 March, there was a Chairman appointed from each country. I was the co-Chairman for Singapore.

The co-Chairman for Malaysia was Tun Ismail Ali, who was the Governor of Bank Negara. That was the situation. Then we carried on. The target date for the two carriers to go their own way was 1st October 1972.

So I suppose because I was the co-Chairman of MSA, I just continued as Chairman of Singapore Airlines. And Singapore Airlines duly took off on 1st October 1972.

IQ: What were the reasons for the split of the MSA?

JYP: The reasons were fairly simple. The two governments, who were the major shareholders, had different ideas of what the airline should be doing.

Malaysia was very interested in knitting together the country — West Malaysia (as they used to call Peninsular Malaysia) and East Malaysia (Sabah and Sarawak). So they wanted to focus on domestic services.

Well, we were not terribly interested in that. We were interested in going international and developing the international routes. So there was a conflict of objective and it was entirely appropriate that each country should go its own way.

IQ: Were you involved in the negotiation process?

JYP: Between the two governments?

IQ: Yes.

JYP: Yes, between Singapore and Malaysia. That started, I think, at the end of 1970 and continued through 1971. I don’t know when we finally signed the agreement. It must have been some time in 1971 or 1972, I can’t quite remember.

IQ: Mr Pillay, do you recall any of the problems or challenges faced during the negotiation process?

JYP: A bone of contention was the division of the assets and the valuation of the assets. On the valuation, we finally settled on book value.

On the division of the assets, everything that was in Singapore came to Singapore. Of course, we paid for it at book value. The assets in Singapore, of course, formed the bulk of the fixed assets because the operating base and the HQ was in Singapore.

Then the aircraft. For the aircraft, we took the long-haul aircraft, essentially the 707. There was an argument over the 737. Finally, I think we took only five of them.

They probably took all of them and the Malaysians bought new aircraft. Then the F27s4 and the other aircraft. I can’t remember what other aircraft were flying around in Sabah and Sarawak. We left it to the Malaysians. In the end it ended amicably.

Growing Singapore Airlines

IQ: Mr Pillay, when SIA [Singapore Airlines] became an independent national carrier on 1st October 1972, what was your vision for SIA then?

JYP: It was very simple. We had already, even before 1st October 1972, placed orders for two [Boeing] 747 aircraft which arrived one year later. That was in September of 1973.

The intention was to really develop our international services and make our way in the world. That was a very simple objective, or mission.

IQ: Looking back, in 1972, the decision to buy the 747 Jumbo Jet was a correct move. But then with the benefit of hindsight, do you think that was a bold decision to take?

JYP: Yes, it was, because we were the first Southeast Asian carrier to buy the 747. Maybe we were probably the first carrier outside Japan and Australia in the Asia Pacific region to buy the 747.

I can’t recall whether Air India had the 747. But the Japanese and Qantas did. That was it.

It took some time before the other Southeast Asian carriers decided to emulate us. But we were the pace-setters. No doubt about it.

IQ: How was SIA going to compete with other national carriers, other airlines, from maybe some of the more developed countries?

JYP: You mean at that time or now?

IQ: At that time.

JYP: At that time it wasn’t too much of a problem, because there were very strict IATA [International Air Transport Association] rules pertaining to fares, level of service and standards.

And they were designed really to help protect carriers. They were not consumer-friendly, they were producer-friendly.

So we had no problem running around these people, doing a bit of discounting here and there, improving the level of service and the quality of service.

Eventually we had improved our service to a point where we were quite outstanding in terms of our service not only in the air, but on the ground as well.

So we had made bold moves in the international arena to expand our services on a systematic calculated basis, while at the same time, improving our service quality and working hard to reduce our costs. In those days we had certain advantages. Labour costs in Singapore were generally lower. But now that advantage has been largely eroded.

IQ: I was going through some news clippings from the early seventies. It seems like after the break from the MSA, SIA went through a process of restructuring in terms of management and organisation. Why was there a need to restructure the SIA after the split?

JYP: I can’t remember any specific restructuring. But restructuring is a continuous process. Sometimes it’s a minor restructuring, sometimes something more significant.

But that goes on all the time. I don’t think we are particularly addicted to restructuring. Indeed, the structure and the basic bare bones of the organisation are essentially the same. You may split departments, add some, occasionally dissolve some as the airline expands. We didn’t engage in, what is now called, re-engineering.

There was no major move to change the structure just for the sake of change. We don’t go in for that sort of activity. We had enough to do without stirring things up.

IQ: Were there a number of staff from the former MSA who joined the SIA after the split?

JYP: Yes.

IQ: Those who worked in Singapore?

JYP: Yes. All the ground base staff in the Head Office and in the Engineering Base and, of course, the ground services. They all continued to work here.

The flight crew (both flight deck), the technical crew as well as the cabin crew, were given the option. Well, in fact, all of them were given the option of joining either MSA or SIA.

Some of the Malaysians among the flight deck crew decided to go back to KL, those who were based in Singapore and who were Malaysians. But many Malaysians remained with SIA.

Then, of course, we just had to add to the numbers. In those days the numbers were quite tiny compared to what we have now.

We now have just over 10,000 in the parent airline and 25,000 in the group as a whole; about nearly 7,500 if I am right, or closer to 8,000, in SATS [Singapore Airport Terminal Services]; about 3,500 in SIA Engineering.

And we’ve got SilkAir and several other smaller companies. Well, I think some restructuring takes place whenever we hive off an activity into a separately incorporated company like SATS. SATS was born in …

IQ: … 1973.

JYP: 1973, you’re right. April 1973, just six months after SIA took off. That made a lot of sense. SIA Engineering Company was formed only three years ago. SilkAir, five or six years ago, it’s a new activity.

Selling Singapore Airlines abroad

IQ: On the question of competing with other airlines, what was the strategy of selling SIA abroad?

JYP: Essentially the superior service that we offered, plus our excellent network in Singapore as a hub.

That continues to be our leitmotiv, our hallmark to this day. In Singapore Airlines, when we started way back in the early seventies, we built a small entity in an industry that was still in its infancy in our part of the world.

The industry has now reached, I would say, maturity in our part of the world, at least in Singapore. Which does not mean that there isn’t scope for expansion.

There is scope for tremendous expansion in the region and in Asia. But nonetheless, we’d reached a certain stage of development where we are virtually on par with the rest of the world, anywhere else in the world.

Could afford to take more risks in the earlier years

But in the early seventies, our industry was young. And we (you may call the players) were also young. And young people tend to be a bit callous. We were prepared to stick our necks out, to take more risks.

There was less to lose. I can’t remember what the net worth of SIA was in those days. But it couldn’t have been more than a couple of hundred million dollars if at all, compared to about $8 billion today.

We were confident in our ability because we thought we had a good management team, a reasonably good product which was gaining acceptance in the world for its quality, and its reliability.

We had been growing quite rapidly and we thought we could continue to grow rapidly. By rapidly, I mean 20 to 30 per cent a year compared with eight to 10 per cent now. But, of course, the quantum bite at 20 to 30 per cent a year was smaller than a quantum bite at eight to 10 per cent now.

Still, in this business, relativity is the name of the game. And we were growing extremely rapidly.

We were able to afford a much higher, what we called, debt to equity ratio of about four to one, since we were growing extremely fast, we were making money and we could service our debts. Right now, we have no debt at all. So we’d become a very conservative organisation.

Well, one thing led to another. We made increasingly larger investments in aircraft. We were bold. We were the first to introduce the [Boeing] 747 into Southeast Asia. We branched out.

We considered the world to be, shall we say, our oyster. And the world meaning really Asia and the developed world — Australia, Japan, Europe and eventually the United States and North America.

Certain parts of the world where we are still not prominent, or even active in some cases, are Africa and Latin America.

We don’t fly at all to Latin America. To Africa, we fly to Egypt (if that can be considered part of Africa), to South Africa and to Mauritius. But we don’t really fly to what is known as sub-Saharan Africa. Not really.

Anyway, to go back to those days. It was a time of very heavy expansion. We were supremely confident of our abilities.

Govt capital injected into business

We took risks but we believed that they were calculated risks. And in the event, we demonstrated the validity of our risk-taking because we didn’t have to go to the government for subsidies or for handouts of any sort whatsoever.

The only injection of capital we had when we started off in 1972 was the share of the assets that accrued to the Singapore government by virtue of its stake in the former Malaysia-Singapore Airlines.

And for 10 years thereafter, we didn’t go to the shareholders for any money. It was only in the early eighties that we sought a further injection of capital from the government.

And that kept us going till our listing in 1985, almost 10 years ago. At the time of listing and as part of the listing process, the company issued fresh capital which brought in $250 million. And that’s it.

The last 10 years we haven’t gone to the shareholders for any funds. Rather, we have been distributing dividends very generously to the shareholders. And we are now in a position — I just said a few moments ago — of not having any debt.

I don’t know whether this gives some flavour to the answer as to how we became risk-takers.

Maybe we were fortunate. I don’t like to call it a gamble. Our calculated risk-taking succeeded. And with each success, we were prepared to take bigger stakes as it were. So our orders became larger in terms of dollars and cents.

But they did not necessarily become more risks. In fact, it could have been less risky because our base was larger, our experience was greater, more widespread, and we were confident of our ability to make those investments.

Right now, we have made an investment when we placed an order for aircraft of $10 billion or more. It didn’t particularly worry us because these are measured investments over a period of time.

And we know that we can generate the cash through profits and through our depreciation to meet the investment outlay.

The iconic image of the Singapore Airlines air stewardess

IQ: How long would this Singapore Girl image last?

JYP: How much longer?

IQ: How long do you see it last?

JYP: I don’t believe they have any deadline, like saying: “Well, it has been going for 20 years. Therefore, another five years and then we’ll change.” I don’t think so.

It’s like the Shell logo which represents the Shell Company and also represents the prominence of their goodies. If you ask the Shell company: “When are you going to change your symbol from a shell to something else?” they’ll say, “Why should we?”

IQ: You were earlier talking on SIA’s stress on quality, superior in-flight service. How do you see SIA going to maintain this trend?

JYP: Through unremitting effort. There’s no mumbo-jumbo and no black magic. It’s just the right policies, constancy of policies. Not shifting about, jumping around from one day to the next, not losing one’s head.

And then responsible management with careful recruitment of people and, above all, keeping them happy, which means your reward system must be appropriate. No favouritism. People know that if they are treated fairly, objectively, and they’ll respond. So you got to maintain morale. Morale is the most important factor in any organisation.

SIA crew put a passenger in a body bag when he was actually asleep, & more stories from an air stewardess

Again, this is not something unique to a particular organisation. It applies to every institution.

You want to succeed. Whether it’s a government department, or a non-profit-making institution like SINDA [Singapore Indian Development Association], or a company, whether privately-owned or government-owned, you got to ensure that your policies or the way you are managing people are appropriate.

That makes a difference. Of course, you must have a business strategy. You can get your personnel policies right, your business strategy should follow.

IQ: You stressed on the superior quality for the in-flight service. Does it mean that SIA actually looks for, in its recruitment process, certain qualities in our air hostesses?

JYP: Yes. Not only in air hostesses but in everybody they recruit. Whatever it is that the carrier wants in a specific area.

If you’re recruiting office boys, then you look for the right caliber to make a good office boy at least for a few years.

You don’t expect him to remain an office boy till he is 65, even if you want to retain him. But if you recruit a young Admin Officer, then you expect that he will work until he is in his 60s. You hope he will remain with you if he is good. Qualities have to be tailor-made to the job specifications.

Travel blogger reviews SIA flight from London to S’pore: Not worth money, crew ‘biggest letdown’

S’pore air steward responds to YouTuber explaining why cabin crew ‘do not have time to talk to you’

IQ: Mr Pillay, I’m sure you must have been asked this question many times before. In your view, what would you attribute to be SIA’s success formula?

JYP: Again, it is hard work with honest, competent people. Again, this applies, as I said, to every institution that I know of.

There should not be any sudden shifts in policies which will only serve to confuse and demoralise people — confuse them at best and demoralise them at worst. There’s no magic formula.

The aim is to be able to survive from day to day, from year to year, from decade to decade. For that, you got to make sure that the people you work with are satisfied, happy, motivated, and that you’ve set appropriate mission, goals and objectives and targets for them, both strategic and tactical.

Then they will perform. Otherwise, if something is missing somewhere, they won’t perform. That’s the difference between a good government and a weak government, a good bureaucracy and an inefficient bureaucracy, or a dynamic institution and a laid back institution.

The same goes for your Ministry. Are you in MITA [Ministry of Information and the Arts, currently restructured into the Ministry of Culture, Community and Youth (MCCY) and the Ministry of Communications and Information (MCI)]?

IQ: Yes.

JYP: Same goes for MITA as for MND [Ministry of National Development] or any Ministry.

IQ: So SIA would place a lot of emphasis on training and development. This would help to raise the morale and retain the staff.

JYP: It would help to improve performance and it will also show staff that they can improve themselves. That will help to improve their morale.

IQ: Mr Pillay, what would it take to keep SIA going successfully?

JYP: No doubt about it, the same formula with the same basics. It doesn’t mean that in 10 years’ time, SIA will have the same configuration of aircraft or network or whatever as it has today.

It might even, who knows, shed some of the activities it has now. It might have taken on some new activities. But those are incidental.

The main consideration is to retain the essential elements, principles, philosophy of good government or good management. There’s no other way.

If you can make sure that your people are there to continue to lead and man the company, the group, the institution or whatever, then it’ll be all right. If not, things will go downhill.

Countries go up and they go down. Companies go up and down. It’s not something preordained. It’s because somewhere along the line, there has been a break. It may not be perceptible, but there has been a discontinuity. In the past, it was forgotten. The future then is at stake.

S’pore’s commercial aviation industry started with a six-seater Malayan Airways airplane

 

Disclaimer statement from World Scientific

While we respect the narratives recounted by our interviewees, we recognise that all oral history accounts, by their very nature, are personal, experiential and interpretive. They are founded on the memories, perceptions and viewpoints of individuals. While all reasonable attempts have been taken to avoid inaccuracies, the excerpts of the interviews found in this book should not be understood as statements of fact endorsed by the National Archives of Singapore, an institution of the National Library Board; the publisher; or the editor.

Top image from National archives of Singapore, Singapore Airlines Facebook

About Mothership

Morning Commute

Interesting stories to discuss with your colleagues in office later

Close